There has been growth in the ac­cep­tance of dig­i­tal trans­ac­tions in Latin Amer­i­ca and the Caribbean (LAC), but the cost of dig­i­tal op­tions re­mains an ob­sta­cle to wider ac­cep­tance in the re­gion.

This was one of the ma­jor points high­light­ed in a re­port by pay­ment tech­nol­o­gy gi­ant Mas­ter­card and re­search group Pay­ments and Com­merce Mar­ket In­tel­li­gence en­ti­tled: “The fu­ture of re­mit­tances in Latin Amer­i­ca: Dig­i­tal­i­sa­tion, mul­ti­ple rails, and the strate­gic role of part­ner­ships.”

The re­port not­ed that just about a decade ago, “Latin Amer­i­ca was far be­hind the glob­al av­er­age in terms of fi­nan­cial in­clu­sion (with 55 per cent of the pop­u­la­tion own­ing a fi­nan­cial ac­count com­pared to 68 per cent glob­al­ly in 2017) but the re­gion ex­pe­ri­enced the fastest dig­i­tal catch-up of all world re­gions dur­ing the pan­dem­ic years.”

It stat­ed, “Mas­ter­card’s 2023 fi­nan­cial in­clu­sion study on Latin Amer­i­ca re­vealed, cur­rent­ly 79 per cent of Latin Amer­i­cans have ac­cess to a fi­nan­cial ac­count and/or deb­it card, and 88 per cent of this group use a mo­bile phone to make pay­ments.”

This in­crease in dig­i­tal ac­cep­tance was backed up by a re­port last week by Mas­ter­card’s ri­val VISA, which iden­ti­fied a no­table in­crease in the num­ber of trans­ac­tions with Visa pay­ment cre­den­tials, in­di­cat­ing the grow­ing ac­cep­tance and adop­tion of dig­i­tal pay­ments.

The num­ber of Visa trans­ac­tions dur­ing Trinidad Car­ni­val 2024 in­creased by al­most 20 per cent in com­par­i­son to Car­ni­val 2023, while con­tact­less trans­ac­tions more than dou­bled in growth.

The re­port con­duct­ed by Visa Con­sult­ing and An­a­lyt­ics (VCA), Visa’s glob­al con­sult­ing prac­tice, re­vealed that trans­ac­tions in key mer­chant seg­ments–su­per­mar­kets, restau­rants, gas sta­tions, and telecom­mu­ni­ca­tions –showed dou­ble-dig­it growth year over year, while there was a si­mul­ta­ne­ous re­duc­tion in ATM with­drawals. Ad­di­tion­al­ly, VISA re­port­ed that the num­ber of Visa cross-bor­der trans­ac­tions made in T&T with in­ter­na­tion­al cards in­creased by dou­ble dig­its dur­ing Car­ni­val 2024 ver­sus the pre­vi­ous year, re­veal­ing a dy­nam­ic growth sce­nario in T&T.

No­tably, the ma­jor­i­ty of trans­ac­tions came from US trav­ellers, fol­lowed by Cana­da and the UK.

The last point, how­ev­er, high­light­ed that de­spite in­creased dig­i­tal adop­tion, there are still signs of in­equal­i­ty as many LAC coun­tries face is­sues of fi­nan­cial ex­clu­sion.

The re­port stat­ed, “The re­gion still must com­bat prob­lems such as en­trenched fi­nan­cial ex­clu­sion, pover­ty, and so­cial and po­lit­i­cal in­sta­bil­i­ty. Coun­tries like Mex­i­co, Guatemala, Hon­duras, El Sal­vador, Pe­ru, Paraguay, and Bo­livia are lag­ging in fi­nan­cial in­clu­sion in­di­ca­tors ( less than 60 per cent fi­nan­cial ac­count ac­cess), as more than 91 mil­lion Latin Amer­i­cans still do not have dig­i­tal ac­counts and an­oth­er 200 mil­lion are in the ear­ly stages of fi­nan­cial in­clu­sion.”

This has led to slow­er adop­tion of dig­i­tal pay­ment so­lu­tions com­pared to the rest of the world as the re­port stat­ed, “dig­i­tal re­mit­tances have grown just slight­ly slow­er than the glob­al pace, at 23 per cent an­nu­al­ly (com­pared to 25 per cent).

To­day, dig­i­tal re­mit­tances have a 43 per cent share of the re­mit­tances mar­ket in Latin Amer­i­ca, near­ly 10 per­cent­age points be­hind the dig­i­tal re­mit­tances mar­ket share at a glob­al lev­el.”

The cost of these trans­ac­tions, the re­port stat­ed, was one of the ob­sta­cles to wider adop­tion.

The re­port said, “In many cas­es, re­mit­tances are still slow and ex­pen­sive. The pri­ma­ry ob­sta­cle to cus­tomers trans­act­ing more fre­quent­ly, ac­cord­ing to Mas­ter­card’s Bor­der­less Pay­ment 2023 glob­al re­port, is high costs and hid­den fees. The prob­lems of cost, se­cu­ri­ty, speed, and cer­tain­ty per­sist, thanks to in­ef­fi­cien­cies stem­ming from in­ter­me­di­aries.

Rasi­ka Raina, glob­al se­nior vice-pres­i­dent, trans­fer so­lu­tions, at Mas­ter­card said in the re­port, “Mov­ing mon­ey is still ex­pen­sive. De­pend­ing on the trans­ac­tion amount, pay­ment method and trans­fer des­ti­na­tion, re­mit­tances still in­volve mul­ti­ple in­ter­me­di­aries, in­clud­ing cor­re­spon­dent banks or oth­er ser­vice providers.”

Com­ment­ing on the re­port, Pao­la Mer­ca­do, dig­i­tal ac­counts and card su­per­vi­sor at the Ar­gen­tine-based pay­ment plat­form Mer­ca­do Pa­go agreed with this as­sess­ment say­ing, “There are many play­ers in the en­tire flow. With so many play­ers, it is a cost­ly flow.”

The re­port fur­ther not­ed, “In a sin­gle trans­ac­tion, mon­ey could flow from a dig­i­tal wal­let to a bank, to one or mul­ti­ple cor­re­spon­dent banks, to an­oth­er dig­i­tal wal­let or re­tail­er, and ul­ti­mate­ly to cash picked up by the re­ceiv­er. Each in­sti­tu­tion and ju­ris­dic­tion the mon­ey pass­es through adds a lay­er of cost, com­pli­ance re­quire­ments, and time.”

This trend was proven true in T&T.

In De­cem­ber, Fi­nance Min­is­ter Colm Im­bert not­ed an in­crease in fi­nan­cial ex­clu­sion while ad­dress­ing a work­shop host­ed by the T&T In­ter­na­tion­al Fi­nan­cial Cen­tre (TTIFC) and the EU-UNCDF- OACP part­ner­ship for dig­i­tal fi­nan­cial in­clu­sion.

Im­bert not­ed that ac­cord­ing to a sur­vey done by TTIFC in 2023, which cap­tured da­ta from ap­prox­i­mate­ly 2,000 house­holds across the coun­try, it was re­port­ed that on­ly 76 per cent of peo­ple own a for­mal fi­nan­cial ac­count com­pared to 81 per cent re­port­ed in 2017 in the World Bank’s in­dex re­port.

Im­bert said then, “There­fore, we have wit­nessed a widen­ing in the fi­nan­cial ex­clu­sion gap, or a re­duc­tion in fi­nan­cial in­clu­sion, over the last five years. There is lit­tle doubt that the COVID-19 pan­dem­ic would have been par­tial­ly re­spon­si­ble for this, as the vul­ner­a­ble pop­u­la­tion suf­fered dis­pro­por­tion­ate­ly from in­fec­tions, loss of em­ploy­ment and in­come and fi­nan­cial dif­fi­cul­ties.”

In­de­pen­dent Sen­a­tor Hazel Thomp­son-Ahye had raised con­cerns about fees im­ple­ment­ed by fi­nan­cial in­sti­tu­tions, and its ad­verse ef­fects on the low or vul­ner­a­ble class dur­ing a re­cent Joint Se­lect Com­mit­tee sit­ting that ex­am­ined an­ti-fraud and cus­tomer pro­tec­tion sys­tems in the lo­cal fi­nan­cial ser­vices sec­tor.

“Who is the among you to pro­tect the poor peo­ple whose bank­ing ac­counts fall be­low $15,000 and the bank grabs $15 un­til the poor per­son might be left with­out any mon­ey in the bank?” the sen­a­tor had asked the deputy in­spec­tor of fi­nan­cial in­sti­tu­tions at the Cen­tral Bank Michelle Fran­cis-Pan­tor dur­ing the sit­ting.

Fran­cis-Pan­tor stat­ed that since 2018, the Cen­tral Bank had is­sued no­tices to banks to en­cour­age low or no-fee ac­counts for the vul­ner­a­ble pop­u­la­tion, which the sen­a­tor called “gen­tle per­sua­sion.”

In his De­cem­ber ad­dress, the fi­nance min­is­ter not­ed that while many banks in our coun­try have pushed dig­i­tal trans­ac­tions, there re­mained scep­ti­cism from the pub­lic to adopt these meth­ods.

“The rapid switch from over-the-counter trans­ac­tions to dig­i­tal con­sumer trans­ac­tions has cre­at­ed con­cern and anx­i­ety for sev­er­al per­sons. This is par­tic­u­lar­ly true for per­sons who don’t know how to make con­tact­less pay­ments and are un­fa­mil­iar with on­line bank trans­fers or mo­bile wal­lets, which is fur­ther ex­ac­er­bat­ed by our low deb­it and cred­it card us­age.

“Mil­lions of peo­ple world­wide still re­ly heav­i­ly on cash; some are bat­tling to hold on­to it. This is the same for T&T, as cash is still heav­i­ly re­lied up­on, par­tic­u­lar­ly for low-val­ue, high-vol­ume trans­ac­tions. The use of elec­tron­ic pay­ments is still low,” he said.

In an in­ter­view with the Busi­ness Guardian last year, Dami­an Coop­er, mar­ket­ing man­ag­er for per­son­al seg­ments at Re­pub­lic Bank said the use of its ewal­let End­cash in­creased by 100 per cent from fis­cal 2022 to fis­cal 2023.

How­ev­er, Coop­er ex­plained to en­cour­age adop­tion, which had been ini­tial­ly slow, the vast ma­jor­i­ty of fees for the ser­vice were waived.